Oil futures climbed on Friday to tally a gain for the week, with optimism over phase one of a potential U.S.-China trade deal lifting prospects for energy demand, even as traders weigh a conflicting outlook for crude supplies.
Crude oil was supported by “growing optimism that ‘phase one’ of the trade deal with China is in the works and could be reached soon,” as confirmed by U.S. Commerce Secretary Wilbur Ross, who said Friday that the negotiations are now down to the last details, said Manish Raj, chief financial officer at Velandera Energy. “Any trade deal with China alleviates demand concerns, and therefore is very bullish for oil markets.”
A fourth straight weekly decline in the number of active U.S. rigs drilling for oil was also supportive. Baker Hughes Co. BKR, +3.61% on Friday reported that the number of active U.S. rigs drilling for oil fell by 10 to 674 this week.
U.S. benchmark West Texas Intermediate crude for December delivery CLZ19, +1.80% on the New York Mercantile Exchange rose 95 cents or 1.7%, to settle at $57.72 a barrel on the New York Mercantile Exchange, with front-month contract prices ending around 0.8% higher for the week.
January Brent crude BRNF20, +0.06% added $1.02, or 1.6%, to $63.30 a barrel on ICE Europe. The global benchmark scored a 1.3% weekly climb.
Both crude benchmarks tallied a second weekly gain in a row.
Developments tied to U.S.-China trade talks have been a key focus for the oil market. On Thursday, White House economic adviser Larry Kudlow offered a largely upbeat assessment of talks, albeit with little detail.
Kudlow said negotiators are getting close to an agreement, but that President Donald Trump wasn’t yet ready to sign off. Trump “likes what he sees, he’s not ready to make a commitment, he hasn’t signed off on a commitment for phase one, we heave no agreement just yet for phase one,” he said at a Council on Foreign Relations event, according to The Wall Street Journal.
Meanwhile, prices for oil had weakened early Friday around the time the Paris-based International Energy Agency, in its monthly report, raised its forecast for oil output growth for countries outside of the Organization of the Petroleum Exporting Countries. The IEA said it expects non-OPEC supply growth to rise to 2.3 million barrels a day next year, up from its previous estimate of 2.2 million barrels a day, with the set to continue leading the way.
“To add to the bearish sentiments, the IEA points to non-US sources for growth in 2020, thereby reducing the dependence on U.S. production growth, which may not be as robust in 2020 as it has been in the last 2 years,” said Raj.
That IEA report came a day after the Energy Information Administration reported a 2.2 million-barrel rise in U.S. crude supplies in the week ended Nov. 8 and a weekly increase of 200,000 barrels a day to a record 12.8 million barrels a day in domestic crude production.
The Organization of the Petroleum Exporting Countries, in its monthly report on Thursday, lowered slightly its own non-OPEC output growth forecast.
Carsten Fritsch, commodities analyst at Commerzbank, noted that OPEC’s figures point to supply outstripping demand by 645,000 barrels a day in the first half of 2020 — underlining the need for another cut in output when OPEC and its allies meet in Vienna next month to discuss the status of their existing supply curbs.
December gasoline RBZ19, +1.30% rose 1.2% at $1.635 a gallon, with prices inching up by 0.08% for the week, while December heating oil HOZ19, +1.62% added 1.6% to $1.948 a gallon, for a weekly rise of 1.6%.
December natural gas NGZ19, +1.25% added 1.6% to $2.688 per million British thermal units, cutting its weekly loss to around 3.6%.